Some relief for wine, brandy industries amid challenges

Cape Town - Although the above-inflation hikes in excise duties in the 2016 Budget may add to what is anticipated to be a challenging year ahead, the South African wine and brandy industry welcomed specific concessions on brandy and sparkling wine.

Excise hikes of 8% on both natural wine and sparkling wine and 8.2% on spirits were announced by Finance Minister Pravin Gordhan.

The introduction of a differential excise tariff for potstill and vintage brandy of 10% lower than other spirits products could, however, provide a boost to a category which has seen a decline in sales over the past few years, according to Rico Basson, managing director of VinPro, the industry body for close to 3 500 SA wine producers and cellars.

With five litres of wine required to produce one litre of brandy, Basson said the benefits of the differential tariff could also extend to wine producers.

“It is also encouraging to see that government’s alcohol tax reform included a review of the way in which excise duty on sparkling wine is calculated,” said Basson.

Basson said the 2016 wine grape harvest is expected to be significantly lower than previous years following a very hot, dry season and fire damage in some areas. Cost hikes pose further challenges in the year ahead.

READ: Heavy tax on 'sinners'

The South African wine and brandy industry aims to grow its 1.2% contribution to national gross domestic product and expand its 300 000 employment figure as part of a new strategic framework, or Wine Industry Strategic Exercise (Wise).

“Achieving these targets will be dependent on government’s willingness to collaborate with and support the industry – together creating a conducive environment for growth,” said Basson.

Smokers and drinkers have again been heavily taxed in the latest budget. The duty on a packet of 20 cigarettes, for example, increases by 6.7% from R12.43 to R13.24, and that on a can of beer (340ml) by 8.5% from 124c to 135c. Cigar smokers will also pay 6.7% more (R4.68 for 23g) and pipe smokers 7% more (27c for 25 g).

The excise adjustments for cigarettes, cigarette tobacco and pipe tobacco are attributable to inflation-linked price increases for the most popular brands in each category.

A review of tobacco product taxation will begin in 2016/17, and will consider both existing and non-traditional tobacco products and their alternatives, such as e-cigarettes.

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* Visit our special issue on Pravin Gordhan's 2016 Budget Speech.